Kelly William Cobb

This week, Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.), and Reps. Lamar Smith (R-Texas) and Steve Cohen (D-TN), introduced the Digital Goods and Services Tax Fairness Act that would prevent states and localities from enacting discriminatory taxes on digital goods, including music, movies, books, and ringtones.

The legislation will restrict multiple states from enacting taxes on one digital good, or levying higher and discriminatory tax rates on digital downloads. Currently, twenty-three states explicitly tax digital goods. The legislation would permit states to tax downloads, but only if elected officials approve a measure to do so. Eight states tax downloaded products by administrative fiat, bypassing the legislative process.

Kelly William Cobb, government affairs manager of Americans for Tax Reform and executive director of StopETaxes.com, made the following statement:

“The Digital Goods and Services Tax Fairness Act rightly prevents multiple states from taxing the same downloaded song, movie, or book as it travels across the Internet to a consumer. It means if the good is taxed, it happens once and only once. The legislation ties the hands of revenue-hungry state and local governments by not allowing them to double or triple tax the digital equivalent of a CD or book you’d buy in a store.

“The bill means that if states want to tax your downloads, elected officials will be held responsible for that vote. No state lawmaker should be looking to raise taxes right now, but quietly behind the scenes, bureaucrats at state Departments of Revenue are enacting taxes on digital goods with zero accountability or public awareness. The measure puts a stop to it and ensures the public knows when government wants to raise their taxes.

“States spending themselves into the red should be looking for places to cut, not looking to raise taxes on downloads. The Digital Goods and Services Tax Fairness Act provides clarity and simplicity, ensuring state and local governments don’t tax digital goods in a discriminatory and burdensome way."

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Today, Americans for Tax Reform commended the Michigan House of Representatives for passing a tax reform package that cuts taxes on net by $712 million over the next three fiscal years.

The tax reform package, which will pave the way for the forthcoming budget, builds off Gov. Snyder’s tax reform proposal. The reforms eliminate the Michigan Business Tax and replace it with a 6 percent flat corporate rate, while eliminating credits and deductions.

Eighteen members of the Michigan House have signed the Taxpayer Protection Pledge, promising their constituents to “oppose and vote against any and all efforts to increase taxes.” Since the reform package amounts to a $712 million net tax cut, it is consistent with the Pledge.

Grover Norquist, president of Americans for Tax Reform, made the following statement:

"This tax cut package is a serious set of reforms to help turn Michigan’s sluggish economy around. Not only does it cut taxes on net by over $700 million, it has the added benefits of simplifying the tax code and stopping government from picking winners and losers in the market.

“This tax package will help to end Michigan’s lost decade of high unemployment, low economic growth, tax hikes, and an exodus of individuals and employers leaving the state. These reforms will lower the barrier for employers to start-up, expand and invest, inevitably creating more jobs across Michigan.”

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Just in time for tax day, Sens. Dick Durbin (D-IL) and Mike Enzi (R-WY) are expected to unveil a bill shortly that would permit - for the first time - states to collect taxes on Internet, catalog, and other sales when the seller is not based in the state. All told, the estimated $23 billion Internet tax hike would permit a small cartel of states to reach outside of their borders to force individuals and businesses who aren't even residents to collect taxes.

The Durbin-Enzi bill is not just an enormous tax hike, its a threat to federalism, accountable government, and interstate commerce. Below is an excert from ATR's policy brief (click here for the full document) on the Senate plan to tax what you buy online:

The federal Main Street Fairness legislation to authorize a compact for Streamlined Sales Tax (SSUTA) compliant states would allow states to raise taxes by an estimated $23 billion. Under the U.S. Supreme Court decisions in Bellas Hess v. Illinois and Quill v. North Dakota, a state cannot require an out-of-state retailer without a physical presence to collect and remit taxes, as this places an impermissible burden on interstate commerce. Main Street Fairness legislation would give Congress’s stamp of approval to circumvent this physical nexus requirement. The legislation would allow SSUTA compliant states to extend tax collection obligations to remote, out-of-state retailers. This would expressly permit – for the first time – state tax collection on Internet, catalogue, and other sales where the seller is not based in the state.

In addition to raising taxes, SSUTA poses a direct threat to federalism and accountable government. First, the project itself allows a small cartel of tax administrators to write multiple states’ tax codes. Federal legislation would incent revenue-hungry states to join this cartel. Second, it exports the burden of tax collection to non-voting out-of-state individuals and businesses that have little ability to petition state and local governments. It puts a significant burden on out-of-state actors to comply with 8,500 tax jurisdictions (brick-and-mortar stores comply with only one), without the ability to object to the multitude of tax rate increases proposed across the country every year.

Americans for Tax Reform strongly supports simplifying federal and state tax codes, and leveling the playing field for all individuals and retailers by lowering tax rates and broadening the tax base. However, as reform must first do-no-harm, ATR opposes any effort – including Main Street Fairness legislation – to reform the tax code in a way that raises revenue for government, without offsetting tax cuts of equal or greater size. Our concerns regarding federalism, accountability, interstate commerce burdens, and the authorization of a state tax cartel are secondary to our goal of simplification, but nevertheless very significant.

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Last Friday, 33 national and state-level think tanks, advocacy groups, and center-right activists sent a letter to Congress strongly supporting efforts to roll back price controls on debit card interchange fees. The price controls were included in last year’s Dodd-Frank financial reform act and authorize the Federal Reserve to cap the interchange fee paid by merchants for debit card transactions. At least one signer, the 60 Plus Association, plans to score any vote to delay the impact of the rules. To quote from the letter:

“Consumers and seniors on fixed incomes will likely bear the brunt of these regulations directly, as card issuers struggle to cover the cost of artificially low price controls on interchange fees. For card holders, this means higher fees, fewer card rewards, the elimination of banking services such as “free checking,” or otherwise. Simultaneously, banks – and particularly smaller card issuers – will be forced to determine whether offering some consumer services is more costly than it is worthwhile.”

Three signers made the following statements:

“Price controls on debit card fees are just one of many new regulations in Dodd-Frank that will cost – not protect – consumers and taxpayers. While the entire Dodd-Frank law should be scrapped, S. 575 is a bipartisan effort to stall draconian rules that will dramatically alter how consumers use debit cards. If this letter makes one thing clear to Congress, it’s that the broader center-right movement wholeheartedly supports tossing out these price controls.”
- Grover Norquist, President, Americans for Tax Reform

“The debit card debacle has focused needed attention on the flaws of Dodd-Frank – which is labeled as ‘Wall Street’ reform but is in reality producing regressive effects for Main Street banks and businesses. Recent bills to repeal Dodd-Frank are a welcome development. But first, we must stop the law's oncoming train wreck that threatens the savings of consumers as well as the safety and soundness of the financial system with price controls that don’t even cover the cost of services to retailers. Only bills such as the bipartisan S. 575 have a realistic shot at avoiding such a train wreck by the Durbin Amendment's implementation deadline of July.”
- John Berlau, Director, Center for Investors & Entrepreneurs, Competitive Enterprise Institute

“The Durbin Amendment calls for unprecedented price controls that not only fail to provide any real benefits for seniors and consumers, but also cause real consumer harms. In addition, these price controls harm the community financial institutions that so many seniors rely upon for banking. Seniors on a fixed budget cannot afford the plethora of new fees that these institutions will now be forced to charge, and may lose access to valuable banking services. That is why we are scoring any vote to delay the implementation of this destructive mandate and require a study of the impact on consumers as vital to the interests of seniors.”
- James Martin, Chairman, 60 Plus Association

With the average consumer facing a wireless tax of 16.3 percent, this week Congress will consider a bill to freeze excessive and discriminatory taxes on cell phone and wireless services. The Wireless Tax Fairness Act would put a five-year moratorium on state and local efforts to raise wireless taxes.

Today, state and local wireless taxes are nearly 4 percent higher than the average sales tax rate. Taxes hit as high as 23 percent in Nebraska, 26.8 percent in Baltimore, and 20.4 percent in New York City. High and discriminatory tax policy doesn’t just skew consumer decisions in the otherwise free-market. By raising the cost of owning a phone or wireless Internet connection, these state and local tax laws put a significant burden on Internet adoption and expansion.

The Wireless Tax Fairness Act was introduced by Reps. Zoe Lofgren (D-CA) and Trent Franks (R-AZ), and Sens. Ron Wyden (D-OR) and Olympia Snowe (R-ME). With a bipartisan list of 144 cosponsors already, it will get a hearing this Tuesday in the House Judiciary Subcommittee on Courts, Commercial and Administrative Law.

CLICK HERE to write your lawmakers and them to freeze your wireless taxes.

Today, Illinois became the fourth state to impose an affiliate nexus Internet tax. After some deliberation, Gov. Pat Quinn continued his streak of enacting economically damaging tax measures by signing House Bill 3659 into law.

The so-called “Main Street Fairness Act” attempts to force online retailers that aren’t based in the state to collect sales tax if they use in-state advertisers or other affiliates. The measure is a legally dubious run-around of current U.S. Supreme Court law under Quill v. North Dakota, which only permits a state to force a company to collect tax if they have a physical presence.

The Department of Revenue, egged on by proponents, claims the bill will raise taxes by up to $170 million per year. Assuming they are correct, ATR scores the measure as a violation of the Taxpayer Protection Pledge. However, a more likely outcome is for online retailers with in-state affiliate to sever their ties, relieving them of the unconstitutional tax collection burden. This is exactly what happened in Rhode Island and North Carolina. Only in New York do affiliate programs continue to exist, and that is simply to show harm in an ongoing legal challenge.

Severing nexus also means that in-state affiliates will go out of business, forcing them to relocate to neighboring states, as many have vowed to do in Illinois. Not only will the state fail to collect new Internet tax revenue, it will lose existing revenue generated from affiliate income taxes. All of these repercussions make the primary goal of the legislation – leveling the playing field – completely irrelevant.

Meanwhile, the Arkansas State Senate passed a similar measure yesterday and legislation is under consideration in South Dakota, Arizona, Hawaii, Connecticut, Minnesota, Vermont, Maine, and – of course – California.

CLICK HERE for ATR's letter to the Arkansas Senate and HERE for ATR's January letter urging Gov. Quinn to veto the measure.

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Today, Americans for Tax Reform commended Michigan Governor Rick Snyder (R) for proposing a budget that will simplify and reform the state's tax code, while cutting taxes for Michiganders. Snyder's executive budget would also cut state spending and implement structural reforms to shore up the state's $1.5 billion overspending problem.

Gov. Snyder's proposal would completely eliminate the Michigan Business Tax, replacing it with a 6 percent corporate tax rate. It would also lower the personal income tax from 4.35 to 4.25 percent and simplify the tax code by eliminating most deductions and credits. Over the next two fiscal years, the budget represents a net tax cut of $122 million, in addition to a promise to cut taxes by another $100 million by fiscal year 2013.

Grover Norquist, president of Americans for Tax Reform, made the following statement:

"After a decade of tax hikes, unsustainable spending, high unemployment, and clear favoritism for public employees over the average Michigan resident, Gov. Snyder has released a budget that will put Michigan on back on the path to fiscal responsibility.

"Snyder's plan contains well over a hundred million dollars of net tax cuts for Michiganders and has the added benefit of dramatically simplifying the state's tax code. The tax reform plan will stop the flood of jobs out of the state by relieving Michigan businesses of an onerous tax burden and attracting new employers from around the country.

"Snyder's budget is a 180-degree turn-around plan from a dark, lost decade in Michigan. Though tax simplification and cuts, spending reductions, and serious structural reforms, Gov. Snyder has paved the way to renew the state's economy and make Michigan competitive again."

For the third year in a row, states and the federal government have raised discriminatory taxes on wireless phone and broadband service. According to a comprehensive study in this month’s State Tax Notes, the average American pays a whopping 16.26% on their wireless phone and broadband bills, with Nebraska residents paying as much as 23.69%.

Much of the blame can be laid at the feet of the federal government, which has raised the federal Universal Service Fund Tax from 2.99% in 2006 to 5.05% today. However, the problem also comes from state and local governments, which continue to raise telecom and 9-1-1 taxes, only to place the revenue into the general fund for unrelated spending. By targeting telecom taxes instead of broad-based income or sales taxes, politicians can make their actions go relatively unnoticed, while continuing to raise taxes on virtually every citizen.

Today, the average state-local tax rate for wireless is 11.21% - a full 3.8% higher than the average state sales tax rate. Even worse, all but three states tax wireless higher than they do the sale of general goods or services. Even New Hampshire – which has no general sales tax – levies an 8.18% tax on cell phones and wireless broadband.

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Americans for Tax Reform announces the launch of DigitalLiberty.Net, a new project that advocates for free-market Internet, technology, telecommunications, and media policy. Digital Liberty will provide policy analysis on issues impacting the Internet and technology, and will be a resource for grassroots activists who believe in free-markets and consumer choice. Digital Liberty’s launch reception was held at the 2011 Conservative Political Action Conference.

Kelly William Cobb, executive director of DigitalLiberty.Net, issued the following statement:

“In recent years, states and the federal government have sought dramatic influence over our Internet, technology, telecommunications, and media landscape. The FCC passed onerous rules to regulate the Internet under ‘Net Neutrality.” Congress and federal agencies are pushing Internet regulations under the guise of protecting online privacy, while ignoring reforms that would protect our 4th Amendment online privacy from government. States across the country want to stifle free speech by replacing ‘parental controls’ on video games with ‘government controls.’ The list goes on. We believe that free markets and consumer choice – not state and federal bureaucrats – should determine the American technology and media landscape.

“Digital Liberty is dedicated to preserving a free market by pushing back against heavy regulation and taxation of all things Internet, tech, telecom, and media. DigitalLiberty.net will serve as a resource for those who believe in constitutionally limited government by providing news updates and policy briefs on tech issues, sharing research from likeminded organizations, and serving the grassroots who believe that technology and media innovation thrives best when markets are free and individuals are free to choose.”

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Over the past year, the Federal Communications Commission (FCC) spent much of its time and energy crafting completely unnecessaryNet Neutrality Internet regulations, while drastically more important policies for advancing technology and telecommunications sat on the sidelines. Perhaps the most important issue ignored by the government is increasing the amount of spectrum available for mobile broadband.

Consumer demand for data on cell phones, tablets, and laptops is growing at 250 percent per year, but the FCC has moved at snail's pace to free up wireless spectrum to deliver it. As a result, FCC inaction to liberate spectrum and inefficient control and use of spectrum by other federal agencies are precipitating a “spectrum crunch.”

Digital Liberty, a special project of ATR, has released a new policy paper called “Liberating Spectrum: Reforming Government Control of Spectrum to Expand Mobile Broadband.” The paper calls for freeing spectrum from government agency control, auctioning off unused spectrum (such as the D Block), and using incentive auctions to free up other spectrum currently held by the private sector. The revenue collected through such auctions can pay down deficits or improve technology in public safety.